Japan Needs Updated Central Bank Laws Before CBDC Launch: Former Minister

Japan’s commitment to the digital yen is growing significantly, and the country appears to be expediting its currency digitization efforts. However, a local regulatory official is counseling that the country should structure its broader crypto industry as it anticipates its state-backed asset launch.

Time to Evolve

Kozo Yamamoto, a top economic policymaker for Japan, has called on the Bank of Japan to refine its responsibilities and mandates towards operating a Central Bank Digital Currency (CBDC), Reuters reports. Per the report, Yamamoto, who formerly worked at the Ministry of Finance and is now the head of the Democratic Party’s council on financial affairs, explained that amendments to the Bank of Japan’s law would help it to better handle several changes from the CBDC. These changes include job creation, inflation management, and much more. 

Like the U.S. Federal Reserve, the BOJ should set job creation and inflation as its mandate […] The new law should also clarify that 2% inflation is the BOJ’s policy target,” he said in part. 

Japan has already established itself as one of the most progressive nations in the world when it comes to cryptocurrency adoption. However, it’s a well-known fact that a CBDC won’t function like any other private asset. To handle such a project efficiently, Yamamoto believes that the Bank of Japan would have to evolve accordingly. 

Yamamoto has been one of the primary voices behind the digital yen. In February, he called on the government to issue a digitized currency, adding that a quick launch would be critical to the country’s hopes for economic survival.

The policymaker’s calls came after China had made significant progress with its CBDC ambitions. Yamomoto explained that the speedy growth of digital currencies in countries would help China improve its hegemony, as its asset would be seen as the de facto global standard. For the country’s economic survival, a CBDC of its own will need to come in quickly.

The Plan to Counter China 

Yamamoto is one of the many people who have called on Japan to act quickly in the wake of China’s continued progress with its digital yuan. Thankfully, the government and the Bank of Japan have heeded his calls and are now quickly working through the development process. 

Last week, a document from the Bank of Japan to the Bank of International Settlements confirmed that it would launch pilot testing programs for the digital yen in 2021. As the document explained, the Bank plans to focus primarily on the asset and its ability to operate in cases of emergencies. 

The Bank noted that Japan is prone to natural disasters, which could knock out electricity supply and internet connections for extended periods. The aim is to develop an asset that can still function if these disasters hit, ensuring that people don’t get stranded. 

The Bank is currently exploring the potential of applying several solutions – including mech networks around long-wave radio transmitters and the Blockstream Satellite, which allows people to send digital currency units without the need for an internet connection.